The good and bad about buying a house in South Africa
Award-winning economist Dawie Roodt said buying a house has many positives and negatives, and whether it is a good decision will depend on the individual.
A house is often the most valuable asset for a family and a core part of people’s retirement planning.
There is also a widespread belief that property is the best investment and that it always appreciates in value over the long term.
Unsurprisingly, many South Africans buy a property as soon as their finances allow. This is made easy by banks lending them the money.
However, Roodt said he is not a big fan of investing in property as there are many drawbacks compared to other asset classes.
He highlighted a handful of the negative aspects of buying a house compared to investing in stocks or other assets.
- Property is illiquid. It takes a long time to buy and sell a property, which means your money is tied up.
- The transaction costs associated with buying and selling a property are high.
- Owning property also comes with many expenses, including rates and taxes, maintenance costs, and levies.
- If you decide to rent out a property, bad renters can damage it and make it difficult to get rid of them.
Despite his negative feelings towards property, Roodt said buying a house also has many positive aspects.
- You can use gearing to buy a property. Simply put, you can use the bank’s money to buy a house.
- Property typically maintains its value in terms of inflation.
- You can stay in the property that you own and enjoy it.
Although there are positives to owning a house, Roodt still does not believe that property is a good investment in the long term.
“I would rather go for something else. If you want to invest in property, rather put your money in a listed property stock,” he said.
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